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AN EQUITABLE 
EXCHANGE SYSTEM 



ALFRED R. JUSTICE. 



^f)ilaticlpf)ta: 

ALFRED J. FERRIS. 

1898. 



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COPYRIGHT, 189.3, P-Y ALFRED R. JUSTICE 




JUN 



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PREFACE, 

In the consideration of nearly all 
economic questions, we are met at 
the very threshold with confusion and 
want of accurate definition, due to 
ambiguity in the use of words, and to 
attempts to reconcile existing condi- 
tions with certain preconceived theories. 

Common observation shows that in- 
crease in the number of laborers 
tends to lower wages, hence there 
springs up the theory that wages 
depend upon the relation between the 
number of laborers and the amount 
of capital devoted to their employ- 
ment. Certain writers, in reflecting 
on this theory, saw that this ought 



PREFACE. 



not to be ; that wages shoitld depend 
upon the ability to produce wealth. 

Likewise in considering the ques- 
tion of what is the cause of value, 
one class of writers insist that sup- 
ply and demand alone is the deter- 
mining cause of value, others say 
that human effort should be the basis 
of value. If, under a competitive sys- 
tem, prices conform to supply and 
demand, it does not thereby prove" 
that, under another system, values 
could not be based upon human effort. 

So with the question as to the 
origin and justification of interest. 
It is easy to show that interest is 
natural under the competitive system, 
as it is clear that the possession 
of capital gives a power to accumu- 
late wealth to the owner. It seems, 



PREFACE. 5 

therefore, perfectly just and proper 
that money should bear interest, and 
it is not generally questioned until 
one examines into its origin and 
calls into question the competitive 
system itself. 



WAGES. 

The current theory of wages starts 
with the proposition that wages, in 
the aggregate, depend upon the ratio 
between capital and population ; hence 
the idea of a Wages Fund out of 
which the laborers are remunerated. 
It therefore becomes impossible for 
wages, considered in the aggregate, to 
increase without a corresponding aug- 
mentation of the Wages Fund, or a 
decrease in the number of laborers. 

This position, it is true, has not 
been without its opponents ; attacks 
upon the doctrine have been made by 
W. T. Thornton, "On Labor, Its 



8 AN EQUITABLE EXCHANGE SYSTEM. 

Wrongful Claims and Rightful Dues ; " 
Prof. F. A. Walker, - The Wages 
Question," Henry George, " Progress 
and Poverty" and others. Mr. Thorn- 
ton's reasons were so potent as to 
cause John Stuart Mill to abandon 
the Wages Fund Theory. Prof. F. A. 
Walker and Henry George have 
demonstrated that the wages of the 
laborer are paid out of the product 
of his industry. Notwithstanding the 
arguments of these able writers, the 
idea that wages depend upon supply 
and demand clings with remarkable 
tenacity to the average newspaper 
editor and politician. It is reflected 
in the laws restricting immigration and 
the prohibition of the importation of 
contract labor, in the efforts made 
by the labor unions to prevent the 



WAGES. 9 

sale of prison-made goods, and In the 
selfishness of trades-unions when they 
restrict the number of apprentices In 
certain trades. 

The doctrine of Protection Is 
grounded upon this false theory of 
wages. The protectionist asserts that 
when foreign-made goods are per- 
mitted to come into the country in 
competition with the domestic product, 
without restriction, the sale of the 
domestic product Is Interfered with 
and wages must necessarily fall, and, 
on the other hand. If tariff duties are 
levied sufficiently high to restrict im- 
portations, just to that extent will the 
demand for domestic goods increase, 
and washes rise. When trade between 
the states is considered, every en- 
couragement is given to facilitate ex- 



10 AN EQUITABLE EXCHANGE SYSTEM. 

changes. State tariffs and discrimi- 
nation are prohibited by law. When 
the Supreme Court decided that it 
was unconstitutional for states to levy 
a tax upon commercial travelers from 
other states, it was hailed with delight 
by merchants and manufacturers every- 
where. While it is looked upon as 
desirable to encourage free trade be- 
tween the North and South and the 
East and West, it is considered wrong 
in principle to admit Canada to the 
same privilege. So soon as the imagi- 
nary boundary line is passed, com- 
petition is assumed to be of a kind 
which will interfere with American in- 
dustry. 

The difference in the rate of wages 
which exists between workmen of the 
southern states and those of the 



WAGES. II 

North is greater than the difference 
existing between the Canadian and 
the resident of Maine. If we investi- 
gate the reason why the American 
Federation of Labor should petition 
Congress to throw out the machines 
proposed to be used by the Bureau 
of Engraving, we shall find the same 
fundamental fallacy which is at the 
root of the Protection theory, which 
advocates restricted immigration, and 
the prevention of the sale of con- 
vict-made products. This fallacy is, 
"That demand for labor is a fixed 
quantity." I am willing to admit 
that so long as the competitive 
system of exchange continues, the 
demand for labor will be interfered 
with sufficiently to justify the position 
of the protectionist and the labor 



12 AN EQUITABLE EXCHANGE SYSTEM. 

unions. But with a system of ex- 
change which will insure to every 
worker the full value of his labor, 
demand in the aggregate will keep 
pace with production in the aggregate. 

Let us consider these subjects in 
detail. A very little reflection will 
show that, as our criminals must be 
fed and clothed, the means for their 
support must be supplied, and the 
common-sense way is to let them 
work and be self-supporting. If 
society is taxed to support them In 
Idleness, the workers must pay the 
taxes. It is fallacious to say the rich 
pay the taxes. All wealth is the pro- 
duct of labor, and the wage-earner 
furnishes the means with which the 
wealthy pay. 

Next, why should additional num- 



WAGES. 13 

bers lower wages ? Let us suppose 
one hundred men engaged in produc- 
tion. If they are producing for them- 
selves, the quantity of their products 
will fix their aggregate wages. Now 
suppose the arrival of one hundred 
immigrants. If each man is able to 
produce as much wealth as each of 
the original one hundred, why should 
wages decline ? If the new arrivals 
happen to be more inventive or more 
industrious than the natives and turn 
out more wealth, why should not 
wages advance ? 

Next is the question of machinery. 
The opposition to the use of machin- 
ery has always been based upon the 
ground that the machine displaced the 
laborer. If it does so, remember it is 
the fault of our system of exchange, 
and not of the machine. 



14 AN EQUITABLE EXCHANGE SYSTEM. 

To return to our one hundred men 
engaged in production. I have stated 
that their wages are determined by 
the amount of wealth they produce. 
Now if one of their number invents 
a machine which enables him to pro- 
duce ten times as much wealth as be- 
fore, is not the aggregate wealth 
thereby increased ? and should not 
wages advance ? 

The reasons why machinery and im- 
provement in methods of production 
fail to produce the improvement in 
the condition of the workers which 
we would naturally expect, and that 
the facts seem to harmonize with the 
wage fund theory, are : 

First, That land is monopolized. 

Second, The wage-earner only re- 
ceives what is left after the landlord 



WAGES. 15 

gets his rent, the capitalist his Inter- 
est, and the merchant his profits, con- 
sequently he Is enabled to purchase 
but a fraction of the wealth he him- 
self produces. Given a system under 
which the wai^e-earner will secure all 
that he Is entitled to, the full value 
of his own labor, and the anomaly of 
an apparent overproduction of wealth, 
accompanied by inability on the part 
of the producers to create demand, 
will be a thing of the past. Produc- 
tion will never be so great in the 
aggregate that demand will not keep 
pace with it. Supply and demand 
will then be equivalent terms. 



l6 AN EQUITABLE EXCHANGE SYSTEM. 



PROFIT. 

Profit is the term used in trade to 
express the sum received for a com- 
modity in excess of its cost. Strictly 
speaking, there is no profit until 
wages, rent, and interest on capital 
invested, are paid. I take the ground 
that profit is inconsistent with an 
equitable distribution of wealth. All 
profit is a deduction from what would 
otherwise go to the producer. 

If we suppose a community en- 
gaged in production, the first essen- 
tial to an equitable exchange would 
be to determine the values of the 
various commodities. To eet at the 



PROFIT. 17 

values, the cost of production must 
be ascertained. Now, if each indi- 
vidual exchanged his goods at the 
cost of production, it is clear that no 
one would derive a profit by ex- 
change. Each would be benefited, 
however, by exchanging a commodity 
for something more useful to himself, 
but the values of the commodities 
would be the same. Now, suppose 
some of the producers, in some way, 
manage to exchange their goods at 
double their cost. Is it not clear that 
their profit would be at the expense 
of the rest of the community ? If all 
the producers doubled the price of 
their goods, no one w^ould derive any 
profit therefrom ; it would be simply 
figuring values in a different ratio. 
The essential idea of profit is that an 



1(5 AN EQUITABLE EXCHANGE SYSTEM. 

owner secures more wealth for his 
goods than he gives. Now, it is per- 
fectly manifest that two parties to an 
exchange cannot both get more wealth. 
One man's gain is the other's loss. 

Our present mercantile system was 
probably the outgrowth of the incon- 
venience each producer would expe- 
rience in hunting up a man who 
wanted his wares. This difficulty 
would at once suggest the plan of 
each man depositing his wares at 
some common center, where each 
could find what he wanted. Some 
one must be employed to attend to 
the distribution, and his pay must 
come out of the common stock. In- 
stead of this method, which seems the 
natural one, the distributors or mer- 
chants found they could fix their own 



PROFIT. 19 

compensation by buying the goods 
from the producers, and adding a 
profit to suit themselves. Those mer- 
chants who could control the most 
money, and who were the sharpest 
in making bargains, became the most 
successful. As the profit system ex- 
tended, individuals combined in order 
to monopolize the natural sources of 
wealth and to obtain control of fran- 
chises, and finally, as a natural evo- 
lution from such a beginning, we 
have the present competitive system. 
We are so accustomed to look upon 
this system as equitable and just, 
that the average man is somewhat 
shocked if you even suggest a pos- 
sible change for the better. The 
profit system is everywhere accepted 
as a natural law. 



20 AN EQUITABLE EXCHANGE SYSTEM. 

Prof. Walker says : " Men pro- 
duce wealth not for the sake of pro- 
ducing it, but with a view to a profit. 
There is," he says, "doubtless a sat- 
isfaction in conferrinor benefits on the 
dependent, a pride in directing great 
operations, an enthusiasm of work, 
which make up a part of the com- 
pensation of many employers ; but it 
is evident that these cannot be relied 
upon to any great extent as motives 
to the systematic and sustained pro- 
duction of wealth through wage-labor. 
Individual profit is and must remain 
the great reason for production. If a 
person have wealth, that of itself con- 
stitutes no reason at all to him why 
he should expend any portion of it 
on labor, on machinery, or on ma- 
terials." 



PROFIT. 21 



On the contrary, I assert that profit 
is in no way essential to the pro- 
duction of wealth. If all goods were 
exchanged at the cost of production, 
without one iota of profit in the eco- 
nomic sense, there would be every 
incentive to create wealth. Men will 
produce to procure wealth for use 
and enjoyment. It is because men 
have wants that wealth is produced. 
Necessity is the primary cause of 
production, not profit. Under our 
competitive system profit is doubtless 
a cause of production, but I hope to 
show that an equitable exchange sys- 
tem is within our reach, one which, 
with profit abolished, will yet bring 
about the greatest possible produc- 
tion of wealth. 

The late Henry George, following 



22 AN EQUITABLE EXCHANGE SYSTEM. 

in the footsteps of earlier economic 
writers, states : "It seems to me 
that in itself exchange brings about 
a perceptible increase in the sum of 
wealth." In the Yankee story of the 
two schoolboys, so 'cute at a trade 
that, when locked in a room, they 
made money by swapping jack-knives, 
there is the exaggeration of a truth. 
Each of the two parties to an ex- 
change aims to get, and as a rule 
does get, something that is more 
valuable to him : — a greater power of 
labor to satisfy desire. Thus there is 
in the transaction an actual produc 
tion of wealth. 

A trading vessel, for instance, 
penetrating to the Arctic regions, ex 
changes fish-hooks, harpoons, powder 
and guns, knives and mirrors, green 



PROFIT. 23 

spectacles and mosquito nets, for pel- 
tries. Each party to the exchange 
gets, in return for what costs com- 
paratively little labor, what would cost 
it a great deal of labor to get by 
either of the other modes of produc- 
tion. Each gains by the act. The 
sum total of the wealth of the world 
is increased by the exchange itself." 

Mr. George first defines wealth 
as "the concrete result, the tangible 
embodiment by change wrought in 
material things, of labor exerted 
towards the satisfaction of desire." 
" To talk of immaterial wealth, as 
some professed economists now talk, 
is as much a contradiction in terms 
as it would be to talk of square cir- 
cles or triangular squares." "Nothing 
can be wealth that is not tano^ible to 



24 AN EQUITABLE EXCHANGE SYSTEM. 

the senses. Nor can wealth include 
any natural substance or form or 
power unmodified by man's exertion, 
nor any human power or capacity of 
exertion. To talk of natural wealth, 
or to talk of human skill, knowledge 
or energy, as included in wealth, 
is also a contradiction in terms." 
"Wealth is the product of labor 
applied to land or its products." 
"Only such things can be wealth, the 
production of which increases and the 
destruction of which decreases the 
aggregate of wealth." 

Accepting this definition of wealth, 
how is it possible to admit that 
wealth increases through exchange ? 
The two boys exchanging jack-knives 
do not add to the sum total of jack- 
knives. Members of the Stock Ex- 



PROFIT. 25 

change and speculators do not in- 
crease the wealth of the country by 
buying and selHng stocks. Nor do 
gamblers playing poker add to the 
number of dollars in existence. Ex- 
changes carried on under the profit 
system differ in no essential particu- 
lar from exchanging stocks, or from 
exchanging dollars by gambling, in so 
far as they affect the sum total of 
wealth. Just as the stock broker and 
the gambler profit at the expense of 
others, so do merchants profit at the 
expense of the producers. Men can 
exchange until doomsday without the 
sum total of the wealth increasing a 
jot. 

All products- of labor which are in 
demand have a normal value. Prices 
may oscillate on either side of this 



26 AN EOUITAIU.E EXCHANGE SYSTEM. 

line of normal value by reason of 
variations in supply and demand. 
This Mr. Georee admits. Then it fol- 
lows, all the wealth of the country has 
a certain value, and such wealth in 
the aggregate can only increase by 
an actual addition to the valuable 
things. Exchange adds nothing what- 
ever. The addition which Mr. George 
claims is immaterial and imaginary."^' 
A similar fallacy shows itself in the 
contention that wealth increases or 
diminishes when general prices rise 
or fall. If the nominal prices of 
all commodities were to be doubled, 
say by an increase in the volume of 
money, the real wealth of the country 
would not be altered thereby ; and 
when stocks tumble one thousand 

*This does not deny that the labor of transportation 
adds to value. 



PROFIT. 27 

millions, owing to a war scare, wealth 
in the aggregate has not changed. 

I have seen it stated that the 
losses this country sustained by the 
depreciation following the demonetiza- 
tion of silver have amounted to billions 
of dollars. The real loss here is not 
the general fall in prices, which sim- 
ply transfers wealth from the debtor 
to the creditor classes, but the loss 
in production due to the enforced 
idleness of the workers. 

If profit is a deduction from 
the wealth-producers' earnings, it will 
seem strange if such a system can 
endure ; nor will it if the waofe-earn- 
ers become intelligent enough to com- 
prehend it. 

Adam Smith's saying that "The 
produce of labor constitutes the natu- 



28 AN EQUITABLE EXCHANGE SYSTEM. 

ral recompense or wages of labor," is 
as true to-day as when he wrote it. 
It may be claimed that profits under 
competition tend to a minimum, — that 
the majority of merchants fail to 
receive any profit over and above what 
might be considered a fair compensa- 
tion for their services. This is true, 
and it is the result of too many being 
engaged in distribution. When we 
consider the enforced idleness of the 
employees of our mercantile establish- 
ments during a considerable portion 
of the day, it will be seen that much 
more business could be transacted 
with half the number of employees, if 
the work could be distributed through 
the day, instead of being crowded 
into a few hours. A more costly 
method of distribution it would be 



PROFIT. 29 

difficult to imagine than the competi- 
tive system. Needless expenses are 
multiplied in every direction. Un- 
necessary, costly display, useless ad- 
vertising, expensive book-keeping, due 
to the credit system, and waste effort 
in order to get trade away from com- 
petitors, are but suggestions of the 
immense savings which would accrue 
to society by the adoption of a 
proper method of distribution. 



30 AN EQUITABLE EXCHANGE SYSTEM. 



INTEREST. 

Probably no subject of economic 
discussion has occasioned greater di- 
versity of opinion, as to its origin, 
than interest. 

The feehncr that interest is a de- 
duction from what would otherwise 
go to the wage-earner, is widespread 
at the present time ; nor is it of 
recent origin. The Mosaic Code for- 
bade the lending, at interest, between 
Jews, although it permitted its accept- 
ance by Jews from strangers. In 
Rome, interest between Roman citi- 
zens was forbidden by the Lex 
Genucia, B. C. 322. 



INTEREST. 31 

The early Christian Church also 
opposed interest. In the writings of 
the Scriptures were to be found pas- 
sages which lent powerful support to 
the feeline against it. From Luke 6 : 
35 : " Lend, hoping for nothing 
again." From Deuteronomy 23 : 19 : 
"Thou shalt not lend upon usury to 
thy brother, usury of money, usury of 
victuals, usury of anything that is lent 
upon usury." 

The taking of interest was for- 
bidden to the clergy. This was after- 
wards extended so as to include the 
laity as well. For 1500 years the 
hostility to interest is manifest in the 
theoloofical and leeal literature of the 
Church. Pope Clement V., at the 
Council of Vienna, in 131 1, went so 
far as to threaten excommunication 



32 AN EQUITABLE EXCHANGE SYSTEM. 

to those magistrates who passed laws 
favorable to interest. Gradually the 
Church consented to a practical com- 
promise, as it could not be entirely 
eradicated, and so it was thought bet- 
ter to allow it within certain limits. 
This view was taken by Zwingli, Me- 
lancthon, and by Luther in his later 
days. In the reign of Henry VII., 
Parliament, in making laws legalizing 
interest, still thought it necessary to 
comment thus : " That all usury was 
damnable, contrary to the law of God, 
and detestable." 

About the middle of the sixteenth 
century numerous writers, in oppo- 
sition to the prohibition of interest, 
found the mercantile community very 
willing to listen to their arguments, 
and a chano-e in sentiment soon be- 



INTEREST. 33 

came manifest. By the end of the 
eighteenth century interest had be- 
come so firmly estabHshed as to have 
but few opponents. 

Calvin is said to have been the 
first theoloo-ian to dissent from the 
views of the canonists respecting in- 
terest. In a letter to his friend 
CEkolampadius, he says : 

''It is with money as it is with a 
house or field ; the roof and walls of 
a house cannot, properly speaking, 
beget money, but where the use of 
the house is exchanged for money a 
legitimate money gain may be drawn 
from the house. In the same way 
money can be made fruitful. When 
land is purchased for money, it is 
quite correct to think, of the money 
as producing other sums of money in 



34 AN EQUITABLE EXCHANGE SYSTEM. 

the shape of the yearly revenue from 
the land. 

" Unemployed money is certainly 
barren, but the borrower does not let 
it lie unemployed. The borrower, 
therefore, is not defrauded in having 
to pay interest ; he pays it, ex pro- 
ve7itu, out of the gain that he makes 
with the money. A rich man, who 
has plenty of landed property and 
general income, but little ready 
money, applies for a loan to one 
who is not so wealthy, but happens 
to have a great command over ready 
money. The lender could, with the 
money, purchase land for himself. If, 
instead of doing so, he contents him- 
self with the interest, the fruit of the 
money, how could this be blame- 
worthy? He concludes that the tak- 



INTEREST. 35 

ing of interest cannot be universally 
condemned ; but neither is it to be 
universally permitted, but only so far 
as it does not run counter to fairness 
and charity. Thus no interest is to 
be asked from men who are in 
urgent need ; that due consideration 
should be paid to the ' poor breth- 
ren ' ; that the welfare of the State 
should be considered, and that the 
maximum rate of interest, established 
by the laws, should in no case be 
exceeded." 

Lord Bacon v/ould permit interest 
on the ground of expediency. "Since, 
of necessity, men must give and take 
money in loan, and since they are so 
hard of heart that they will not lend it 
otherwise, there is nothing for it but 
that interest should be permitted." 



36 AN EQUITABLE EXCHANGE SYSTEM. 

John Locke, the eminent philoso- 
pher, in " Some consideration of the 
consequences of lowering- the interest 
and raising the value of money," says: 
"Money is a barren thing and produces 
nothing, but by compact transfers that 
profit, that was the reward of one man's 
labor, into an other man's pocket." 
Later he justifies interest as a neces- 
sity, owing to the constitution of human 
society, and ''it is as equitable to re- 
ceive interest for a loan, as to receive 
rent from land." 

To Turgot we are indebted for the 
first attempt at a scientific solution of 
the problem, known as the " Fructi- 
fication Theory." As capital may be 
invested in land, and the possession 
of land guarantees the obtaining of a 
permanent income or rent without 



INTEREST. 37 

labor, this gives to capital a power 
of increase which is interest proper. 
In other words, "A definite capital 
must yield a definite interest, because 
it may buy a piece of land bearing a 
definite rent." 

But, as Dr. Bohm-Bawerk very 
justly remarks : *' Why can a person 
with capital buy a rent-bearing piece 
of land ? Turgot, in anticipation of 
this natural question, appeals to the 
relation of demand and supply as at 
any moment furnishing the ground 
for a definite relation of price be- 
tween capital and labor. But is this 
a full and satisfactory answer to the 
question ? Certainly not. The man 
who, when asked what determines a 
certain price, answers, ' Demand and 
supply,' offers a husk for a kernel." 



38 AN EQUITABLE EXCHANGE SYSTEM. 

Henry George's explanation of In- 
terest Is similar to Turgot's. He 
states that '' interest springs from 
the reproductive powers of nature." 
Thus, " If I put away money, It will 
not Increase ; but suppose I put away 
wine ; at the end of a year I will 
have an Increased value, for the wine 
win have improved In quality. Or, 
suppose I set out bees. At the end 
of the year I will have more swarms 
of bees, and the honey which they 
have made. Or, supposing I turn 
out sheep, or hogs, or cattle ; at the 
end of the year I will, upon the 
average, have an increase." 

*' Now," says George, "What gives 
the increase in these cases Is some- 
thing which, though It generally re- 
quires labor to utilize It, is yet dis- 



INTEREST. 39 

tinct and separable from labor : the 
active power of nature, the principle 
of growth, of reproduction, which 
everywhere characterizes all the forms 
of that thing or condition we call life, 
and it seems to me this is the cause 
of interest." 

'' This attempt to separate produc- 
tion into two classes, in one of which 
the natural elements assist in produc- 
tion while in the other they do not, 
is untenable. The co-operation of 
nature is universal ; all production 
rests on the fact that by the appli- 
cation of natural forces we put im- 
perishable matter into useful forms. 
Whether the natural power of which 
we avail ourselves in this be vege- 
tative or inorganic, mechanical or 
chemical, makes no difference what- 



40 AN EQUITABLE EXCHANGE SYSTEM. 

ever in the relation In which natural 
power stands to our labor." (Dr. 
Bohm-Bawerk.) 

George insists that all capital must 
bear interest, because it may be ex- 
changed for corn, cattle, bees or 
wine ; but is the increase in the value 
of a quantity of corn or cattle or 
bees, which time brings about, with 
the help of nature, worth more than 
the original quantity of such corn, 
cattle or bees, plus the labor ex- 
pended in attending to the increase ? 
There Is nothing in George's explana- 
tion to prove it. Unless the repro- 
ductive powers of nature be monopo- 
lized, it is difficult to see how any 
gain can accrue to the user thereby. 
If the soil is accessible to everyone, 
no one will obtain any advantage 



INTEREST. 41 

over his neighbor. The laborer is 
entitled to the full value which his 
work, plus the reproductive power of 
nature, creates. 

Senior justifies interest by claiming 
it as the reward of abstinence. But 
abstinence is not productive. If the 
whole world refrained from using 
wealth, capital would not, by virtue 
of such abstinence, increase. In loan- 
ing capital, you are doing the recipi- 
ent a service, but it may also be true 
that the borrower is doing you a ser- 
vice in taking care of it. Capital, in 
most of its forms, is more or less 
perishable, and use may tend to 
preserve it. A vacant house soon 
deteriorates, as many owners well know. 

Bastiat thinks it only necessary to 
point to the increased efficiency of 



42 AN EQUITABLE EXCHANGE SYSTEM. 

labor, due to the possession of tools, 
to show the justice of interest. That 
the possession of tools increases the 
productive power of labor, and raises 
general wages, is evident. But the 
question is. Where tools are in uni- 
versal use, and there is no monopoly, 
do the users of tools secure increased 
prices for their products which enable 
them to pay interest ? Does not the 
competition of sellers compel a man 
who pays interest to sell his goods 
as low as a man who owns his 
tools, and has no interest to pay ? 
If the opportunity to create their own 
capital is offered to everyone, very 
few men will pay interest for the use 
of what their own labor will create 
for them. 

That the power that exists in 



INTEREST. 4-^ 

machinery and tools to increase the 
productive power of labor is not 
the cause of interest, is conclusively 
proven by the fact that during the 
past fifty years, which marks the most 
important era in the age of invention, 
interest has declined. 

Dr. Bohm-Baw^erk, whose criticism 
of the various interest theories has 
earned for him a world-wide reputa- 
tion, takes the ground that interest 
has its origin in the fact that present 
goods have a different value from 
future goods. '' If one were to 
give a thousand persons the choice 
whether they would rather take a oift 
of $100.00 to-day, or take it fifty 
years hence, surely all the thousand 
persons w^ould prefer to take the 
$100.00 now^ Or, if one were to 



44 AN EQUITABLE EXCHANGE SYSTEM. 

ask a thousand persons, who wished 
a horse, and were disposed to give 
$100.00 for a good one, how much 
they would give now for a horse that 
they would only get possession of In 
ten or In fifty years, although as 
good an animal were guaranteed at 
that time, surely they would all name 
an Infinitely smaller sum. If they 
named one at all, and thereby they 
would surely prove that everybody 
considers present goods to be more 
valuable than future ooods of the 
same kind." 

But is this true of all capital ? Let 
us see. Here is a business property 
centrally located. If one thousand 
persons were asked if they would 
take its value now or ten years 
hence, would they all prefer it now ? 



INTEREST. 45 

Here is a quantity of whiskey and 
wine. Is it manifest that everyone 
would prefer the vaUie of the present 
goods to that of the future goods ? 
It is true of most capital that its 
present value is greater than future 
value, but it is not true of all capital. 
It is no unusual matter for the 
owners of present wealth to prefer 
its future use, and to pay storage 
and safe-deposit companies to deliver 
it to them at a future date. 

To me it seems clear that interest 
can be accounted for, first, by our 
laws, which permit men to buy land 
and thus control the natural sources 
of wealth ; second, by our exchange 
system, which enables men to invest 
capital in a profit-making business ; 
third, by the unequal distribution of 



46 AN EQUITABLE EXCHANGE SYSTEM. 

capital, due to the monopoly of 
natural opportunities. 

If the land were owned by the 
State, as it should be, and the profit 
system abolished, capital could no 
longer be invested so as to bring in 
a return in interest. The only source 
left for the capitalist to derive an in- 
come from would be production, and so 
long as capital is in the hands of the 
few interest will obtain ; but even this 
source will gradually disappear as cap- 
ital becomes more uniformly diffused. 
If it be asked what inducement is left 
to the capitalist to engage in produc- 
tion, I reply, profit is not the cause of 
production. Men will produce because 
they are in want of something, and in 
order to produce they will accumulate 
capital. 



INTEREST. 47 

If there be a normal or natural 
interest rate, why should the laws of 
nations prohibit usurious rates ? It is 
looked upon as perfectly right and 
proper to take six per cent, interest, 
and yet it is made a criminal act to 
take seven per cent. 

That interest is not a natural thing 
is proven by the fact that it never 
has, nor ever can, continue uninter- 
ruptedly for a long period. Edward 
Kellogg says : '* Suppose, when Vir- 
ginia was settled in 1607, England 
had sold to the first settlers the 
whole of the United States for ^1000, 
and had taken a morto-aoe for this 
sum, with the understanding that the 
interest was not to be paid off, but 
to be added annually to the principal ; 
in two hundred and fifty years the 



48 AN EQUITABLE EXCHANGE SYSTEM. 

debt would have reached the enor- 
mous sum of $33,554,432,000. All 
the increase in the wealth of the 
nation, due to labor, would not 
equal this sum." 

Says Arthur Kitson : " It is not 
necessary to go back so many years 
to show the impossibility of usury as a 
scientific principle. Usury is always in- 
creasing more rapidly than wealth. It 
knows no period of depression, no time 
of stagnation, no failure of crops, no 
unfortunate speculation, no condition of 
ill-health and inability to produce. It 
forever goes on as regular as time, 
and as relentlessly as gravitation, count- 
ing and adding to men's burdens, pil- 
ing them higher and higher, until the 
load becomes too great and they fall, 
crushed by the weight of oppression." 



INTEREST. 49 

Says Mr. I. W. Bennett, in The 
Arena, March, 1894: ''The borrowed 
capital of this country claims more in 
remuneration than the country can 
produce. Every dollar invested in 
business claims a return called inter- 
est ; every dollar representing debts 
unpaid claims a like remuneration. 
This must all be paid out of the 
production of each year, and from 
each year's product men must be fed 
and clothed and sheltered. The 
wealth of the world must be kept 
up ; buildings, machinery, everything, 
must be kept in repair ; and improve- 
ments for use in the future must be 
taken from the stock of the present. 

" There is not wealth enough to 
meet all these obligations, and the 
business of the world must go into 



50 AN EQUITABLE EXCHANGE SYSTEM. 

the hands of a receiver every now 
and then, so that a new start in 
business may be made. The coun- 
try, with its alHed industries, is analo- 
gous to a mammoth business con- 
cern. When it contracts greater 
HabiHties than it can meet it fails, 
and we have a financial panic. This 
state of bankruptcy is chronic. 
Counting everything, the liabilities of 
the country are always greater than 
its assets. The industrial world is 
always in a state of potential bank- 
ruptcy, but credit tends to keep it 
out of the hands of a receiver." 

Interest is unquestionably the chief 
cause of the inequality in the distri- 
tribution of wealth. The possession 
of money enables men to live in idle- 
ness from the labor of others. Pro- 



INTEREST. 51 

hibit the monopoly of land, the 
natural source of all wealth, and 
do not permit men to secure by 
exchange a portion of the value 
created by others, and the interest 
problem will settle itself 



52 AN EQUITABLE EXCHANGE SYSTEM. 



RENT. 

Rent springs from what Ricardo 
calls the " original and indestructible 
properties of the soil." It is deter- 
mined "by the excess of the produce 
of land, over that which the same 
application can secure from the least 
productive land in use." As applied 
to agricultural land, there is no dis- 
puting this definition ; the mere state- 
ment is sufficient to bring conviction. 
But when we investigate the cause 
of store rents, we find they are due 
to competition amongst merchants for 
an opportunity to make profit. 

It is clear that economic rent is 



RENT. 53 

the result of land monopoly, and in 
justification we must assume that men 
have the right to take possession, 
and demand rental for the use of the 
land. The question of the private 
ownership of land must be considered 
in relation to the best interest of the 
entire community. No one can dis- 
pute the right of a community, or 
an individual, to take possession of 
a tract of land not previously occu- 
pied, and make use of it ; but this 
right must always take into con- 
sideration the rights of future genera- 
tions. Says Henry George : "As 
for the deduction of a complete and 
exclusive individual right to land from 
priority of occupation, that is, if 
possible, the most absurd ground 
on which land ownership can be 



54 AN EQUITABLE EXCHANGE SYSTEM. 

defended. Priority of occupation give 
exclusive and perpetual title to the 
surface of the globe on which, in the 
order of nature, countless generations 
succeed each other ! Had the men 
of the last generation any better right 
to the use of this world than we of 
this ? Or the men of a hundred 
years ago, or of a thousand years 
ago ? Had the mound-builders, or 
the cave-dwellers, the contemporaries 
of the mastodon and the three-toed 
horse ; or the generations still further 
back, who, in the dim a^ons that we 
can only think of as geologic periods, 
followed each other on the earth we 
now tenant for our little day? 

" Has the first-comer at a banquet 
the right to turn back all the chairs, 
and claim that none of the other 



RENT. 55 

guests shall partake of the food pro- 
vided, except as they may make 
terms with him ? Does the first man 
who presents a ticket at the door of 
a theatre, and passes in, acquire by 
his priority the right to shut the 
doors and have the performance go 
on for him alone ? Does the first 
passenger who enters a railroad car 
obtain the right to scatter his bag- 
gage over all the seats, and compel 
the passengers who come in after 
him to stand up ? The cases are 
perfectly analogous. We arrive and 
we depart, guests at a banquet con- 
tinually spread ; spectators and par- 
ticipants in an entertainment where 
there is room for all who come ; pas- 
sengers from station to station on a 
car that whirls through space, our 



56 AN EQUITABLE EXCHANGE SYSTEM. 

rights to take and possess cannot be 
exclusive ; they must be bounded 
everywhere by the equal rights of 
others." 

Private property in land had its 
origin in conquest. In our own coun- 
try it is easy to trace titles. The 
kings of England, France and Spain, 
by virtue of the right of might, took 
possession of the land, made grants 
of immense tracts to certain favorites, 
by whom in turn it was parceled out 
to various settlers, and thus we buy 
and sell the land regardless of how 
the title was acquired. In Pennsyl- 
vania we pride ourselves on the fact 
that William Penn purchased the land 
from the Indians, and, as Henry 
George remarks, "there is not much 
doubt they would have sold him the 



RENT. 57 

moon if he had thrown in another 
barrel of rum." As we are not 
believers in the divine right of kings, 
how can we admit the claims of 
the present owners derived from this 
source ? 

The right of property in wealth 
which is the product of human labor, 
is absolute, both legally and morally, 
provided it has been honestly ac- 
quired ; but the land is not of man's 
creation. The right to its use belongs 
to the living ; our ancestors could 
convey no valid title to deprive us 
of it. The fact that innocent holders 
have paid for their land in honest 
earnings, may rightfully claim con- 
sideration when the people make up 
their minds to claim their heritage, 
but the right to the possession is 



58 AN EQUITABLE EXCHANGE SYSTEM. 

inalienable. I have seldom met a man 
but would acknowledge the rightful 
ness of this position, yet they are 
always ready to defend private own- 
ership on the ground of expediency. 

The question of tenure would be 
just as important if the public owner- 
ship of land were established, and 
we need have no fears but that a 
method would be devised which would 
give a fair and equal chance to 
everybody. 

Henry George's Single Tax would 
solve the difficulty if the competitive 
system is to continue ; but if the 
people can understand that it is 
possible to establish a system which 
will insure an equitable distribution 
of wealth, and, at the same time, 
virtually do away with land values, 



RENT. 59 

there will be but little use for the 
Single Tax. 

The total amount paid in rents is 
prodigious, and there is no disputing 
the fact that, as a factor in the dis- 
tribution of wealth, it is second in 
importance only to interest. The 
various sources which make up the 
sum total of rentals are : 

Business properties. 

Residence properties. 

Farm properties. 

The rent of business properties is 
due, almost entirely, to competition 
amongst merchants for an oppor- 
tunity to make profits. A portion of 
the sum demanded represents the in- 
terest on the capital invested in the 
house, plus the sum necessary to keep 
it in repair ; but by far the greater 



6o AN EQUITABLE EXCHANGE SYSTEM. 

portion is due to the profit system. 
Abolish the profit system, and what 
becomes of these land values ? 

The rent of the second class, or 
residence properties, is partially due 
to competition for desirable sites, 
and chiefly due to their proximity to 
the business centres and places of 
amusement. Do away with the profit 
system, and the speculative value, 
due to location, would disappear. 

The rents of farm lands owe their 
existence to convenience of access to 
the best markets, or to difference in 
fertility. This latter cause, which Ri- 
cardo calls the ''original and inde- 
structible properties of the soil," is 
chiefly the result of the application 
of labor and fertilizers. While there 
is doubtless considerable difference in 



RENT. 6 1 

the natural productiveness of the 
soil, this difference may be almost 
annulled by human ingenuity and 
natural agents. Even the desert may 
be made to blossom by conveying 
water from the mountain, and the 
rocky hillsides used to great advan- 
tage in raising apples, potatoes, or 
valuable timber. 

The taxing, by the State, of the 
value of farm land, would thus be a 
very difficult problem. The question 
would constantly arise whether the 
difference in fertility were due to 
natural causes, or the expenditure of 
capital and labor. The difference in 
values arising from location of farms, 
in reference to markets, is being 
gradually eliminated by improved 
transportation facilities. 



62 AN EQUITABLE EXCHANGE SYSTEM. 

The Single Tax confines its opera- 
tions to the taxing of land values, 
and would place no restraint upon 
the production of wealth by taxing 
the products of labor. The question 
arises, If its operations are to be so 
confined, how can they find any land 
values to tax which are not due to 
the labor of man? All land in its 
natural state is the gratuitous offering 
of nature to mankind. The valuable 
qualities which arise through the ex- 
penditure of labor, — the draining of 
the swamps, the clearing of the for- 
ests, removal of stones, and the appli- 
cation of fertilizers, — are property, and 
to tax these is essentially the same 
as to tax the value of a house. 

Land values, apart from the real 
values due to the expenditure of 



RENT. 63 

labor, are not wealth. If every land 
value due to competition were to fall 
to zero to-morrow, the sum total of 
wealth, according to Mr. George's 
definition, would not be affected in 
the least. As all wealth is the prod- 
uct of human labor, all taxes must 
come from labor. It is impossible to 
shift it to any other source. Tax in- 
comes if you will, but then inquire 
what is the source of incomes. You 
can tax wealth where you find it, but 
wealth, the product of labor, is the 
only value which can be taxed. 
Changes in values, like the "un- 
earned increment " of land, are purely 
imaginary. A general advance in 
such values does not affect wealth. 
It appears to me our language re- 
quires some other word than value to 



64 AN EQUITABLE EXCHANGE SYSTEM. 

express the difference between such 
values and those which increase the 
sum total of wealth. 

The question of how the people are 
to get possession of their inheritance, 
the land, is, as Herbert Spencer de- 
clares, one of the most intricate prob- 
lems society will one day have to 
solve. 

John Stuart Mill advocated the tak- 
ing by the State of the future un- 
earned increment, by fixing the value 
at the present time and appropriating 
the future increase. This is, as 
Henry George states, a cumbersome 
method, and all that can be said in 
its favor is, that it might be better 
than no plan. 

Herbert Spencer says : '' Had we 
to deal with the parties who originally 



RENT. 65 

robbed the human race of its heri- 
tage, we might make short work of 
the matter." 

A plan which seems to me to be 
feasible, is for the State to assess the 
value of the land and the improve- 
ments separately. The State shall 
then purchase the land from the pres- 
ent owners at the assessed valuation, 
payments to be made annually. Such 
payments are to remain as an incum- 
brance against the property. By this 
method the State will gradually ac- 
quire title without the shock which 
would follow more radical measures. 
In order to meet these annual pay- 
ments, the State will levy a tax upon 
land values and incomes. 

There is no way by which State 
ownership can be accomplished, ex- 



66 AN EQUITABLE EXCHANGE SYSTEM. 

cept by appropriation. Call it taxes, 
or disguise it as you may, it is still 
appropriation. To meet the payments 
we must tax wealth where we find it. 
In securing possession of the land no 
one will be dispossessed. The own- 
ers of the improvements will still own 
them, and can buy and sell such im- 
provements at their values, as will be 
explained in the exchange system 
proposed. 



OVERPRODUCTION. 6/ 



OVERPRODUCTION. 

The belief that panics and dull times 
are due to overproduction is wide- 
spread. It has its basis in the fallacy 
that demand is a fixed quantity, 
whereas men's wants increase with the 
ability to gratify them. Overproduc- 
tion of material things is not an incon- 
ceivable condition, but it could only 
be possible when the wants of the 
whole community were supplied ; and 
it is absurd to say this is the case 
when so many are suffering from actual 
want. A man may be able by his 
labor to produce more than enough 
to purchase food, clothing, and shelter; 
if he does so, and saves a part of his 



68 AN EQUITABLE EXCHANGE SYSTEM. 

earnings, we do not look upon this as 
overproduction ; we call it accumula- 
tion, and look upon it as a commend- 
able and worthy act. Most men would 
want, besides food, clothing and shelter, 
various objects of wealth which might 
add to their pleasure. If a man were 
of a literary turn, he might desire a fine 
library ; if musical, a piano ; or if he 
had a taste for art, he could create 
a demand for paintings, statuary, etc. 
Very few men but would desire a 
beautiful home ; others might want 
leisure to devote to study. As long 
as such wants exist and remain un- 
satisfied, there is no overproduction. 
Carried to its logical conclusion, over- 
production would do away with the 
necessity for work ; if it were the true 
cause of our trouble there would be 



OVERPRODUCTION. 69 

no satisfactory solution of the labor 
problem. 

To be consistent, the overproduc- 
tionist should rejoice in fires, floods, 
shipwrecks, wars, and other calamities 
which cause a destruction of wealth : 
he must discourage invention, depre- 
cate the use of labor-saving machinery, 
and advocate restricted production. 

I have no doubt you have all heard 
such ideas advanced as — " Do not fires 
create a demand for labor ? " or, ''If 
we have war, will there not be a great 
demand for supplies of all kinds ? " 
If fires create a demand for labor, 
why not burn up our city ; and if this 
would not be sufficient to give em- 
ployment to the idle, we might create 
a still greater demand for labor, by 
burning up New York City and 



70 AN EQUITABLE EXCHANGE SYSTEM. 

Chicago. Whatever destroys wealth 
already produced, whether it be by 
means of fire, flood, shipwreck, war, 
or strikes, deducts from the sum total 
of wealth, and each one is a loser in 
proportion to his interest. 

When labor-saving machinery was 
first introduced, the poor, half-starved 
workers naturally looked upon the 
machine as depriving them of the 
opportunity to work. They saw in 
numerous instances how machinery at 
the outset actually brought people to 
want, and hence the aversion to the 
employment of machinery which even 
now is not entirely dispelled. 

A machine which does the work of 
ten men, apparently throws nine of 
the ten out of employment. What it 
really does, or should do, is to increase 



OVERPRODUCTION. 71 

the productive power of labor tenfold. 

The greater the production of wealth 
the more there is to divide. If by a 
false wage system the workers fail to 
receive their share of the advantage 
which improved methods of production 
bring about, don't blame the machine. 
If consumption fails to keep pace with 
production, there is but one explana- 
tion of it, which is, that the wao-e- 
earners only get a fraction of the 
wealth they produce. It is impossible 
for a wage class to create a demand 
for ten billions of wealth with five 
billions in wages to do it with. Give 
the producer in wages that which he 
is entitled to,— the full value of his 
labor, — and there can be no general 
overproduction. 

It is possible to create a glut in 



*J2 AN EQUITABLE EXCHANGE SYSTEM. 

almost any commodity if sufficient 
labor and capital be devoted to its 
production ; but general overproduc- 
tion means too much of everything. 
The reason why men work and pro- 
duce wealth is to satisfy their wants, 
and when all wants are supplied there 
is no longer any reason why men 
should work. But don't count too 
heavily on the ability of mankind to 
produce too much wealth. 

The following article, taken from 
Bastiat's ''Political Economy," edited 
by David A. Wells, will show how slow 
has been the accumulation in the past, 
and may serve as an antidote to 
those who fear overproduction : * 

''By the census of 1890 the aggre- 
gate wealth of the United States, 

*A few changes are made in the figures to make them 
correspond with later census reports. 



OVERPRODUCTION. 73 

making all due allowances for dupli- 
cation in valuation, was probably not 
in excess of seventy-two thousand mil- 
lions of dollars. But vast as the sum 
is, and difficult as it certainly is for 
the mind to form an adequate con- 
ception of it in the aggregate, it is 
nevertheless most interesting to in- 
quire what it is that, measured by hu- 
man effort, it represents. And the 
answer is that it represents, first, a 
value, supposing the whole sum to be 
apportioned equally among an as- 
sumed population of seventy millions, 
of about one thousand and twenty- 
five dollars to each individual : — not a 
large amount if one were to depend 
on its interest at six per cent, as a 
means of support ; and second, it rep- 
resents the surplus result of all the 



74 AN EQUITABLE EXCHANGE SYSTEM. 

labor, skill and thought exerted, and 
all the capital earned and saved, or 
brought into the country, for the last 
two hundred and fifty years, or ever 
since the country became practically 
the abode of civilized men. 

*' But, with capital, or the instru- 
mentalities for creating abundance, in- 
creasing thus slowly, it certainly 
stands to reason that we need to be 
exceedingly careful, lest by doing any- 
thing to impair its security, we impair 
also its rate of increase ; and we ac- 
cordingly find, as we should naturally 
expect from the comparatively high 
education of our people, that the idea 
of any direct interference with the 
rights of property meets with but lit- 
tle favor upon this side of the Atlan- 
tic. But, at the same time, we cannot 



OVERPRODUCTION. 75 

deny that many of the most intelli- 
gent men and women interested in 
the various labor reform movements 
in this country, taking as the basis of 
their reasoning the large nominal ag- 
gregate of the national wealth, and 
the large advance which has recently 
been made in the power of produc- 
tion, and considering them in the ab- 
stract, irrespective of time or distribu- 
tion, have nevertheless adopted the 
idea, vague and shadowy though it 
may be, that the amount of the pres- 
ent annual product of labor and capi- 
tal is sufficient for all ; and that all 
that it is necessary to do to insure 
comfort and abundance to the masses 
is for the State somehow to inter- 
vene, either by fixing the hours of 
labor, or the rates of compensation 



"J^ AN EQUITABLE EXCHANGE SYSTEM. 

for service, or the use of capital, and 
compel its more equitable distribution. 
" Now, that a more equitable dis- 
tribution of the results of production 
is desirable, and that such a distribu- 
tion does not at present take place 
to the extent that it might without 
impairing the exercise of individual 
freedom, must be admitted ; but, be- 
fore undertaking to make laws on the 
subject, is it not of importance to first 
find out how much we have really 
got to divide ? Let us see. Stated 
in money, the maximum value of the 
annual product of the United States 
is not in excess of $10,000,000,000 
(probably less) ; of which the value of 
the annual product of all our agricul- 
ture, our cotton and our corn, our 
beef and our pork, our hay, our 



OVERPRODUCTION. 'J'J 

wheat, and all our fruits, is returned 
by the last census, with undoubted ap- 
proximate accuracy, at less than one- 
half that sum, or in round numbers 
at $5,000,000,000. 

*' But, while this sum of estimated 
yearly income, like the figures which 
report the aggregate of our national 
wealth, is so vast as to be almost be- 
yond the power of mental conception, 
there is yet one thing about it which 
is certain and can be readily compre- 
hended, and that is, that of this whole 
product, whether we measure it in 
money or in any other way, fully 
nine-tenths, and probably a larger' 
proportion, must be immediately con- 
sumed in order that we may simply 
live, and make good the loss and 
waste of capital previously accumu- 



78 AN EQUITABLE EXCHANGE SYSTEM. 

lated, leaving not more than one-tenth 
to be appHed in the form of accumu- 
lation for effecting a future increased 
production and development. 

" Or, to state the case differently, 
and at the same time illustrate how 
small, even under the most favorable 
circumstances, can be the annual sur- 
plus of production over consumption, 
it is only necessary to compare the 
largest estimate of the value of our 
annual product with our largest of 
the aggregate national wealth to see 
that, practically, after two hundred 
and fifty years of toiling and sav- 
ing, we have only managed as a 
nation to get about three and a 
half years ahead in the way of 
subsistence ; and that now if, as a 
whole people, we should stop work- 



OVERPRODUCTION. 79 

ing and producing, and repairing 
waste and deterioration, and devote 
ourselves exclusively to amusement 
and idleness, living on the accumula- 
tion of our former labors or the 
labor of our fathers, four years would 
be more than sufficient to starve 
three-fourths of us out of existence, 
and reduce the other one-fourth to 
the condition of semi-barbarism ; a re- 
sult, on the whole, which it is well to 
think of in connection with the pro- 
mulgation of certain new theories, 
that the best way of increasing abun- 
dance, and promoting comfort and 
happiness, is by decreasing the aggre- 
gate and opportunities of production. 
In fact, there are few things more 
transitory and perishable than that 
which we call wealth ; and, as spe- 



80 AN EQUITABLE EXCHANGE SYSTEM. 

cifically embodied in the ordinary 
forms we see about us, its duration is 
not, on the average, in excess of the 
life of a generation. 

'' The railroad system of the coun- 
try is estimated to have cost more 
than nine thousand millions of dol- 
lars, but if left to itself without re- 
newals or repairs, its value as prop- 
erty in ten years would entirely van- 
ish ; and so also with our ships, our 
machinery, our tools and implements, 
and even our land, when cultivated 
without renovation. For it is to be 
remembered that those same forces of 
nature which we have mastered and 
made subservient for the work of pro- 
duction, are also our greatest natural 
enemies, and if left to themselves will 
tear down and destroy much more rap- 



OVERPRODUCTION. 8l 

idly than, under our guidance, they will 
aggregate and build up. A single 
night was sufficient in Chicago to ut- 
terly destroy what was equivalent to 
one-quarter of the whole surplus 
product which during the preceding 
year the nation had accumulated ; and 
of all the material wealth of the great 
and rich nations of antiquity, of Egyp- 
tian, Assyrian, Tyrian and Roman 
civilization, nothing whatever has come 
down to us, except, singularly enough, 
those things which, like their tombs 
and public monuments, never were 
possessed of money valuation. But 
the inferences which we are warranted 
in drawinof from these facts and hg;- 
ures are by no means exhausted. 
Supposing the value of our annual 
product, — ten thousand millions, — to 



82 AN EQUITABLE EXCHANGE SYSTEM. 

be equally divided amongst our pres- 
ent population of seventy millions, 
then the average income of each indi- 
vidual would be ^142.50 per annum, 
out of which food, clothing, fuel, shel- 
ter, education, traveling expenses, and 
means of enjoyment, are to be pro- 
vided, all taxes paid, all waste, loss 
and depreciation made good, and any 
surplus available as new capital added 
to former accumulations. 

'' Now, if at first thought this de- 
duction of the average individual in- 
come of our people seems small, it 
should be remembered that it is 
based on an estimate of annual na- 
tional product greater both in the ag- 
gregate and in proportion to num- 
bers than is enjoyed by any other na- 
tion, our compeers in wealth and civ 



OVERPRODUCTION. 83 

ilization ; and further, that this $142.50 
is not the sum which all actually re- 
ceive as income, but the average sum 
which each would receive were the 
whole annual product divided equally. 
But, as a practical matter, we know 
that the annual product is not divided 
equally ; and, furthermore, that as 
long as men are born with different 
natural capacities it never will be so 
divided. Some will receive and do 
receive as their share of the annual 
product the annual average we have 
stated, multiplied by hundreds or 
even thousands, which of course ne- 
cessitates that very many others shall 
receive proportionately less. And 
how much less is indicated by recent 
investigations, which show that for the 
whole country the average earnings of 



84 AN EQUITABLE EXCHANGE SYSTEM. 

laborers and unskilled workmen are 
not in excess of $500 per annum, the 
maximum amount being received in 
New England, and the minimum in 
the Southern, or former slave-holding 
States, which sum, assuming that the 
famiHes of all these men consist of 
five — two adults and three children — 
would give $100 as the average 
amount which each individual of the 
class referred to produces, and also 
the amount to which each individual 
must be restricted in consumption ; 
for it is clear that no man can con- 
sume more than he or his capital pro- 
duces, unless he can in some way ob- 
tain the product of some other man's 
labor without giving him an equiva- 
lent for it. 

*'We are thus led to the conclu- 



OVERPRODUCTION. 85 

sion that, notwithstanding the wonder- 
ful extent to which we have been en- 
abled to use and control the forces 
of nature, for the purpose of increas- 
ing the power of production, the time 
has not yet come when society in the 
United States can command such a 
degree of absolute abundance as to 
justify and warrant any class or indi- 
vidual, rich or poor, and least of all 
those who depend upon the product 
of each day's labor to meet each 
day's needs, in doing anything which 
can in any way tend to diminish 
abundance ; and, furthermore, that the 
agency of law, even if invoked to the 
fullest extent in compelling distribu- 
tion, must be exceedingly limited in 
its operations. 

'* Let the workingman of the United 



86 AN EQUITABLE EXCHANGE SYSTEM. 

States, therefore, in every vocation, 
demand and strive if he will for the 
largest possible share of the joint 
products of labor and capital ; for it 
is the natural right of everyone to 
seek to obtain the largest price for 
that which he has to sell. But if, in 
so doing, he restricts production, and 
so diminishes abundance, he does it 
at his peril ; for, by a law far above 
any legislative control or influence, 
whatever increases scarcity not only 
increases the necessity but diminishes 
the rewards of labor. 

" Street processions, marching after 
flags and patriotic mottoes, even if 
held every day in the week, will 
never change the conditions which 
govern production and compensation. 
Idleness produces nothing but weeds 



OVERPRODUCTION. 87 

and rust ; and such products are not 
marketable anywhere, though society 
often pays for them most dearly." 



88 AN EQUITABLE EXCHANGE SYSTEM. 



INFLUENCE OF POPULATION. 

The Malthusian doctrine, or the ten- 
dency of population to increase faster 
than the means of subsistence, is a 
recognized principle in economics. 
While some attach great importance to 
the theory, others, like Henry George, 
refuse to recognize it even as a ten- 
dency ; or, if recognized, to be classed 
in the same category as the return of 
the glacial period, or the exhaustion 
of the supply of oxygen. 

It appears to me that in Mr. 
George's efforts to disprove the doc- 
trine, he has gone to the other ex- 
treme: he has taken Mr. Malthus too 
literally ; for instance, Mr. Malthus 



INFLUENCE OF POPULATION. 89 

simply supposes a case when he 
speaks about population increasing in 
a geometrical ratio, while the means of 
subsistence only increase in an arith- 
metical ratio ; he did not lay it down as 
a law. In fact, Mr. Malthus insists that 
the principle of population must be 
looked upon as a tendency only. He 
says ; '' We have already seen that 
the limit to the population of commer- 
cial nations, is the period when, from 
the actual state of foreign markets, 
they are unable regularly to import an 
increasing quantity of food. And the 
limit to the population of a nation 
which raises the whole of its food on 
its own territory is, where the land 
has been so fully occupied and worked, 
that the employment of another 
laborer on it, will not, on an average, 



90 AN EQUITABLE EXCHANGE SYSTEM. 

raise an additional quantity of food, 
sufficient to support a family of such 
a size as will admit of an increase of 
population. This is evidently the ex- 
treme practical limit to the progress 
of population, which no nation has 
ever reached, nor indeed ever will." 

''There is, however, a limit which, 
if the capital and population of a 
country continue increasing, they must 
ultimately reach, and cannot pass ; and 
that, upon the principle of private 
property, must be far short of the 
utmost capacity of the earth to produce 
food." "That the ultimate check to 
population (want of food) is never the 
immediate check except in cases of 
actual famine." 

It seems to me that it is no reflec- 
tion on the bounty of nature to admit 



INFLUENCE OF POPULATION. 9I 

a mere tendency; and with the qualifi- 
cations made by Mr. Malthus it seems 
to need no proof ; it is self-evident 
there is a limit to the production of 
food. With all the improvements 
which have come down from past ages, 
we are still unable to produce more 
than a certain quantity of cattle to a 
given area. 

The mind assents to a possible limit 
in this direction, but not so with popu- 
lation. When considering the possi- 
bility of population increasing, we must 
admit that there must be some natural 
check ; and, as Malthus states, this 
check is not the limit set by the 
inability to raise food. The stationary 
period would be reached when the in- 
creasing effort necessary to support a 
family in that degree of comfort which 



92 AN EQUITABLE EXCHANGE SYSTEM, 

Is considered essential, is no longer 
effective. 

I agree with Henry George, that it 
is absurd to claim that poverty, as it 
exists to-day, is due to such tendency; 
we have not come anywhere near to 
the stage of diminishing returns : the 
earth abounds with natural wealth, 
millions of acres are uncultivated. 
Even in England the limit of cultiva- 
tion is nowhere near attained. " The 
soil now produces eight times as much 
food as it produced hve hundred years 
ago. In those days half the arable 
land lay in fallow, the amount of wheat 
produced averaging but eight bushels 
to the acre. 

There was no artificial grass ; clover 
was unknown, cattle were small and 
stunted by the privation and hard fare 



INFLUENCE OF POPULATION. 93 

of winter ; the average weight of a 
good ox was under four cwt." (Rog- 
ers, Pol. Econ.) 

Prof. Senior states that ''of the 
37,000,000 acres in England and 
Wales, not over 85,000, less than one 
four-hundredth part, are in a state of 
high cultivation, and that 5,000,000 
acres are waste." He estimates the 
possibilities of production, with proper 
application of fertilizers, deep-soil plow- 
ing, drainage, etc., to be more than 
ten times the present output. 

Edvvard Atkinson states : " It is 
absurd to attempt to measure the 
power of subsistence. No man yet 
knows the productive capacity of a 
single acre of land anywhere in re- 
spect to food. The whole existing 
population of the globe, estimated at 



94 AN EQUITABLE EXCHANGE SYSTEM. 

1,400,000,000 persons, could find com- 
fortable standing room within the limits 
of a field ten miles square." Penn- 
sylvania could give each person twelve 
hundred square feet of space. We 
can raise wheat enough on a small 
part of the territory of the United 
States to feed the world. 

Our farmers complain of the fact 
that they are compelled to sell their 
produce at prices which enable them 
to make but a scant living. Fruit is 
permitted to rot on the trees, rather 
than to go to the expense and risk 
of shipping It to market. I know of 
one instance of a farmer within ten 
miles of Philadelphia, who raised 1200 
bushels of sweet potatoes, and could 
not sell the lot for as much as would 
pay the cost of transportation. 



INFLUENCE OF POPULATION. 95 

Of course such cases are excep- 
tional, but they go to show that the 
trouble is not due to a shortage of 
food. Tens of thousands of worthy 
people in the city want the food, but 
through inability to market the one 
commodity they have for sale, — their 
labor, — are prevented from purchasing 
the farmer's supplies. 



96 AN EQUITABLE EXCHANGE SYSTEM. 



MONEY AND VALUE. 

The need of money springs out of 
what Prof. Jevons calls a double co- 
incidence in barter. Thus, if a tailor 
desired to exchange a coat for a pair 
of shoes, he must first find a party 
who has shoes to exchange, and sec- 
ondly, a party who has shoes to ex- 
change who wants a coat. Another 
difficulty in barter is to settle differ- 
ences in value. Thus, if the parties 
to the exchange should agree that 
the coat was worth twice as much as 
the shoes, it would be necessary for 
the tailor to accept, in settlement of 
the balance, articles he did not re- 



MONEY AND VALUE. 97 

quire, or to give credit to the shoe- 
maker until such time as he might 
require another pair of shoes. 

An amusing incident illustrating the 
need of money is mentioned by Prof. 
Jevons: ''Some years since, Mile. Zehe, 
a singer in the Theatre Lyrique, in 
Paris, made a professional tour around • 
the world, and gave a concert in the 
Society Islands. In exchange for an 
air from Norma and a few other 
sones she was to receive a third of 
the receipts. When counted, her 
share was found to consist of three 
pigs, twenty-three turkeys, forty-four 
chickens, five thousand cocoanuts, be- 
sides considerable quantities of ba- 
nanas, lemons and oranges. In Paris, 
as the prima donna remarks in her 
lively letter printed by Mons. Wolow- 



98 AN EQUITABLE EXCHANGE SYSTEM. 

ski, this amount of live-stock and 
vegetables might have brought four 
thousand francs, which would have 
been good remuneration for five 
songs. In the Society Islands, how- 
ever, pieces of money were very 
scarce, and as Mademoiselle could not 
consume any considerable portion of 
the receipts herself, it became neces- 
sary in the meantime to feed her pigs 
and the poultry with the fruit." 

In order for exchange relations to 
exist, it will be necessary to devise a 
method whereby a comparison can be 
made of the various commodities and 
thereby determine the value relation. 
Our present method is to make a 
definite quantity or weight of gold a 
standard of value. By comparing the 
value of any commodity with the gold. 



MONEY AND VALUE. 99 

we are supposed to arrive at the 
value of any other commodity. But 
how do we get at the value of the 
gold ? Place a piece of gold by the 
side of a pair of shoes. You can 
compare their weight, color or other 
physical properties, but this will not 
give you their value relations. The 
idea of a standard is something which 
is invariable. The standard of weight 
is the pound avoirdupois, which is 
equal to 27.7 cubic inches of distilled 
water ; the standard of measure is the 
yard, which is equal to the length of 
a pendulum beating sixty seconds to 
the minute ; but you might as well 
fix on a block of ice in summer as a 
standard of weight as upon gold as a 
standard of value. Value is a rela- 
tion which must be compared in order 



lOO AN EQUITABLE EXCHANGE SYSTEM. 

to be ascertained. If you should 
double the number of pound weights 
or yardsticks, would that alter the re- 
lation between a pound weight or 
yardstick and the thing that is to be 
weighed or measured ? Manifestly, no. 
But now suppose that you double the 
quantity of your standard of value — 
gold. In so doing, do you alter the 
relation between the goods and the 
gold? Unquestionably, yes. It will, 
therefore, be seen that there is no 
such thing as a standard of value. If 
gold itself possessed value in the 
same sense that a pound of iron pos- 
sesses weight, then it would be an 
easy matter to compare values ; but 
it is essential to the existence of 
value that something else be present 
to compare it with, whereas with the 



MONEY AND VALUE. lOI 

pound of iron it exists by virtue of 
the force of gravity. 

There are two ways to determine 
value relations, but before considering 
these methods let us inquire into the 
character of the various commodities 
which constitutes a nation's wealth. 
We can separate these into two 
classes : 

First, Those which are strictly lim- 
ited in quantity, and by their nature 
cannot be increased or reproduced, 
such as rare coins, old books, curiosi- 
ties, antiquities, statuary, paintings, 
and objects of a similar nature. 

Second, Those which can be indefi- 
nitely increased in quantity by the 
application of labor and capital. To 
this class belong all the manufactured 
wealth and agricultural products of 



102 AN EQUITABLE EXCHANGE SYSTEM. 

every description. While we may ad- 
mit that, theoretically, there is a limit 
to the products of the soil, this limit 
has never yet been attained, so they 
may be properly included in this 
class. The second class is by far the 
more important of the two, and in- 
cludes probably ninety-nine per cent, 
of the entire wealth of the country. 

Let us now consider the two meth- 
ods of determining the value relation 
with the view of reaching a conclu- 
sion as to which of the two will best 
promote the interests of the pro- 
ducers. The first is the supply and 
demand method. 

It is evident that it would be very 
unjust for exchanges to be based on 
quantity alone. Because there hap- 
pened to be fifty pairs of shoes in 



MONEY AND VALUE. IO3 

the market to one hat, is no reason 
why one hat should be worth fifty 
pairs of shoes. And it is equally 
clear that demand alone should not 
determine the rate of exchange. 

How can you compare the demand 
for a steam yacht with the demand 
for a suit of clothes ? Everyone 
would want a suit of clothes ; very 
few want a steam yacht. If demand 
alone were to settle value, a suit of 
clothes would be worth more than a 
steam yacht. If we consider both 
supply and demand, without taking 
into consideration the cost of produc- 
tion, it will bring about grave injus- 
tice in exchange, as this system offers 
no incentive for industry and thrift, 
but, on the contrary, places a pre- 
mium on laziness. 



104 AN EQUITABLE EXCHANGE SYSTEM. 

Let one class of producers invent 
machinery, work industriously, and use 
every method which we would uphold 
as commendable and desirable, and 
what is the result ? An increased 
production, and consequently a fall in 
its value as compared with other com- 
modities. Now, if the makers of any 
other commodity are lazy and thrift- 
less, they will receive in the higher 
price due to restricted production as 
much as if they had used all the 
energy possible. This is the ten- 
dency under our present system. 

It may be argued that under a 
state of freedom, if one class of pro- 
ducers overstock the market, that the 
fall in values would cause laborers to 
leave the industry which offers small 
remuneration and enter one which of- 



MONEY AND VALUE. IO5 

fers greater rewards. If everyone were 
master of all trades this mobility of 
labor, which is assumed by econo- 
mists, would work to a charm ; but 
here is the difficulty. How many of 
the half-starved miners seek to better 
their condition by changing their 
trades? If they do, it must be in 
some line which requires no special 
training, and ninety-nine chances out 
of a hundred, such avenues of em- 
ployment are already filled. 

We will now examine the second 
method of determining values, cost of 
production, which is dependent upon 
the quantity of labor and expenses 
necessarily attached to the production. 
By quantity of labor I mean quantity 
compared with its efficiency. Thus 
the product of an unskilled laborer 



I06 AN EQUITABLE EXCHANGE SYSTEM. 

would not equal the product of a 
skilled mechanic, either in quantity or 
quality. Two hours' work of the 
former might equal but one hour's 
work of the latter. Now, as a mat- 
ter of fact, the cost of production is 
taken into consideration in fixinor the 

o 

price of all manufactured commodi- 
ties. Both supply and demand also 
affect values under our present sys- 
tem. I am aware that modern au- 
thorities claim that values cannot be 
determined by cost of production. 
Macleod insists that cost of produc- 
tion can only affect value in so far as 
it affects supply. The criticism of 
Karl Marx's value theory, by Dr. 
Bohm-Bawerk, is the most able of any 
I have read, and yet he admits all that 
is necessary to establish my claim. 



MONEY AND VALUE. IO7 

I assert : 

First, That a system of exchange 
based upon cost of production is en- 
tirely practicable, confining it to those 
goods which may be indefinitely in- 
creased. 

Second, That because the value of 
such goods as curiosities, paintings, 
etc., may only be determined by sup- 
ply and demand, is no reason why all 
values must be settled that way. 

Dr. Bohm-Bawerk, in his criticism, 
inquires : ''Is it even true that in 
all goods possessing exchange value, 
there is this common property of be- 
ing the product of labor? Is virgin 
soil a product of labor, or a gold 
mine, or a natural seam of coal ? 
And yet, as everyone knows, these 
often have a very high exchange 



I08 AN EQUITABLE EXCHANGE SYSTEM. 

value ; and how can an element that 
does not enter at all into one class 
of goods possessing exchange value, 
be put forward as the common uni- 
versal principle of exchange value." 

In putting forward this argument he 
evidently thinks he has his opponent 
'' in chancery." But, may I ask, why 
has virgin soil, or a gold mine, or a 
natural seam of coal, value ? Is it 
not because such things have been 
made property and become the sub- 
jects of capitalistic monopoly? The 
coal mines are beyond price in their 
value to mankind, but such natural 
agents are the gratuitous gifts of 
nature to mankind, they should be 
owned in common and mined by the 
state in the interest of all, and the 
price of coal would then be deter- 



MONEY AND VALUE. lOQ 

mined by the average cost of produc- 
tion. 

The proper function of demand is 
to give direction to production. That 
which men have to exchange is their 
labor. The direction this labor is to 
take ought to be regulated by men's 
wants, but these wants must not con- 
trol the value relation. 



NOTE. 



Upon what does the value of gold depend? 
Is it primarily the cost of production? or its 
scarcity? or is the coinage price fixed by gov- 
ernments the determining factor? If gold is to 
serve as a standard of value, an absolute, fixed, 
invariable standard, which will enable us to 
compare values of commodities at all times, it 
is of first importance to determine this question. 

If cost of production determines its value, it 
is evident we could not have selected a com- 



no AN EQUITABLE EXCHANGE SYSTEM. 

modity out of the whole category of objects of 
wealth, in which the cost of production is more 
variable. Here is a gold nugget which only cost 
the labor of stooping to appropriate. The Klon- 
dike miner may secure ^300 a day for his work, 
while thousands of others may search months 
and years without any result. How can you get 
at an average cost of production, when the statis- 
tics of the returns are positively unattainable ! 
Only those commodities the production of which 
can be indefinitely increased, which are free from 
restrictions, and are not the subjects of monopoly 
in any shape can have their values determined 
by cost of production. 

Nature has placed the deposits of gold in un- 
known quantities in various localities ; these 
known localities are soon monopolized. When 
the owner of a mine gets absolute possession, he 
can secure laborers to work at a fixed price, 
and the product of their labor he sells entirely 
regardless of the cost of production. The United 
States mint purchases all that he can procure at 
^20.67 per ounce, whether it costs him ten cents 
an ounce or ^100 an ounce. If gold were not 
the subject of monopoly and could be indefinitely 



MONEY AND VALUE. Ill 

increased, and the mints would simply stamp 
the coin as of a certain weight and fineness, 
its value would conform to the cost of produc- 
tion. If, for instance, gold could be obtained 
from seawater at a cost of ^5 an ounce, which 
has been recently claimed can be done, and pro- 
viding the method of obtaining it were known to 
the public, the value would fall, but how would 
this change in value be manifested ? If the gov- 
ernment still coined 25.8 grains of gold and 
called it a dollar, this would make one ounce 
nominally worth ^20.67. The prices of com- 
modities would be inflated to four times the 
present rates. It is evident this would not alter 
the values of commodities, but their values would 
be figured on a different ratio. If a hat is worth 
$4, a pair of shoes $2, and a coat $10, an infla- 
tion in price which would make hats worth $16, 
shoes $8, and coats $40, would not give their 
respective owners any power to get more in ex- 
change ; they could get more gold but it would 
take more gold to buy commodities. 

The demand for gold in the arts takes up only 
a fractional portion of the total product ; the 
chief demand is for a medium of exchange. 



112 AN EQUITABLE EXCHANGE SYSTEM. 

The price of gold as expressed in dollars can 
never change by reason of varying cost of pro- 
duction, or through increase in quantity, as long 
as the government coins a dollar out of 25,8 
grains of gold. 

A lowering cost of production of gold may 
indeed be accompanied by falling prices of com- 
modities. This would be the case if the produc- 
tion of wealth in the aggregate had increased 
more rapidly than the increase in the quantity of 
gold, which, we premise, would accompany 
lowering cost. Gold is the one commodity in 
continual and universal demand. This does not 
spring from the beauty, utility, or any inherent 
quality of the gold, but owing entirely to the 
demand for a medium of exchange. 

The adoption of an equitable exchange system 
would relegate gold to its proper place. The 
demand would be limited to its use in the arts, 
and its price determined by the average cost of 
production. 



PLAN IN DETAIL. II3 



PLAN IN DETAIL. 

The question of supreme importance 
to the producing classes is to secure 
the value of what they produce. 

It will be admitted that our present 
competitive system enables some men 
to acquire enormous fortunes, entirely 
disproportionate to mere differences in 
intellectual or physical capacity. An 
Astor can accumulate millions without 
the slightest effort on his part. A 
Rockefeller can, by practically control- 
ing the petroleum output, accumulate a 
fortune which represents the savings of 
a Hfetime of 100,000 men ; and a Gould 
or a Vanderbilt can likewise acquire 



114 AN EQUITABLE EXCHANGE SYSTEM. 

enormous wealth by controlling rail- 
road transportation. But why particu- 
larize ? I find no fault with the in- 
dividuals ; they are doing, on a large 
scale, what every man endeavors to 
do, and must do, to succeed under our 
competitive system — monopolize as 
much of the trade as possible. No 
matter whether he be lawyer, doctor, 
artist or merchant, each one is striving 
to oret as much as he can. It is the 
system which is wrong, and I believe 
that the evils are recognized by far 
the greater number of people, but they 
know not how to remedy them. 

The tree which absorbs the moisture, 
and prevents the light from reaching 
the ground, has many branches, and 
philanthropists are busy hacking off 
limbs, while new ones are constantly 



PLAN IN DETAIL. II5 

taking their place. Whether expended 
in promoting civil service reform, or 
tariff reform, or bimetalism, or charity, 
such well-meant effort is doomed to be 
ineffectual in remedying the trouble : 
we must remove the tree, root and 
branches ; and this can be done only 
by a radical change in our exchange 
system. 

I am aware of the difficulty of the 
task. To alter our entire exchange 
system cannot but be attended with 
results which will bring trouble to 
many, but I sincerely believe the good 
which would follow the adoption of the 
exchange system I offer, will make the 
difficulties seem trivial in comparison. 
A man can, if he possess health and 
strength, and under ordinary circum- 
stances, support a family with the bare 



Il6 AN EQUITABLE EXCHANGE SYSTEM. 

necessities of life ; but it requires un- 
remitting toil and the practice of strict 
economy to do so. What has he to 
fall back on when sickness overtakes 
him ? How make provision for old 
age? 

The claim that the laboring classes 
were never so well off as now, and the 
attempt to prove it by pointing to 
savings-banks' accumulations and gov- 
ernmental statistics about the advance 
in wages, etc., may satisfy a certain 
class of the community, who have pros- 
pered owing to their superior business 
qualifications, or to fortunate circum- 
stances, but it will not convince the 
man who has been hunting for work 
for months unsuccessfully, and how 
many such there are at the present 
time, every employer of labor knows. 



PLAN IN DETAIL. II7 

No wao^e statistics are valid that do 
not take into consideration the number 
of workers out of employment, and 
the number working on short time ; 
and these facts were not considered 
in the Aldrich report, 1893, which is 
so frequently quoted by those who 
do not wish to recognize the real con- 
ditions. 

'* Savings bank statistics show accu- 
mulations, but by whom? The records 
of the Surroo^ate Court of New York 
show that two-thirds of the families 
not only possess no savings bank 
account, but no registered property of 
any description." "The investigations 
of the Massachusetts Labor Bureau, 
under General Oliver, show that the 
bulk of deposits belong to a compara- 
tively small class of well-to-do citizens ; 



Il8 AN EQUITABLE EXCHANGE SYSTEM. 

manufacturers, traders, and lawyers, 
who use these banks instead of banks 
of deposit ; capitalists, persons living 
on their incomes, use them to escape 
taxation and the care necessitated by 
other investments." (Spahr.) 

Mr. Giffen, the English statistician, 
makes the claim that during the last 
half-century : First, Weekly wages have 
increased about sixty-five per cent. ; 
Second, That the hours of labor have 
generally been reduced ; Third, That 
yearly wages have been increased one 
hundred per cent. Just how a reduc- 
tion in the hours of labor should in- 
crease the yearly wages he does not 
explain. 

The tenth census for the year 1880 
states that $245,000,000 were paid by 
the railroads in interest and dividends, 



PLAN IN DETAIL. 1 19 

while wages and salaries were but 
$221,000,000. 

The inequality in the distribution of 
wealth is further shown by the fact 
that one per cent, of the families in 
America receive, in income from prop- 
erty alone, as much as fifty per cent, 
of our famihes receive in both income 
and wages, and also that one family 
out of every one hundred owns as 
much wealth as all the remainder. 

It is not, however, the purpose of 
this paper to prove conditions by sta- 
tistics ; the question with which we 
have to deal is. How are we to rem- 
edy these recognized evils ? 

First, then, we must abolish our sys- 
tem of exchange, whereby those who 
possess capital can secure for them- 
selves the wealth which is produced 



I20 AN EQUITABLE EXCHANGE SYSTEM. 

by others. Instead, then, of exchanges 
being carried on by merchants, under 
the profit system, I propose that, — 
Governmental warehouses shall be es- 
tablished for the reception of all useful 
commodities ; producers may bring 
their products to these warehouses and 
receive for them certificates of value, 
which shall be based upon the cost 
of production. The cost of produc- 
tion is to be determined exactly as 
it is done now in all factories, except 
that such costs will be much easier 
to reckon, as most of the expenses 
which are necessarily attached to dis- 
tribution under the present system, 
such as salaries of commercial travel- 
ers and their railroad fares and hotel 
expenses, advertising, etc., which are 
such an uncertain element in figur- 



PLAN IN DETAIL, 121 

ing costs, will be done away with. 

To further simplify the cost of pro- 
duction, I would suggest that no77zinal 
wages should be the same in all trades 
in all factories ; those workmen receiv- 
ing the highest nominal wages whose 
trades require the greatest amount of 
skill, or where the healthfulness or un- 
healthfulness, agreeableness or dis- 
agreeableness of the occupation might 
justify the nominal differences. 

With a market for their production 
assured, any body of men could hire 
capital and engage in production. 
These men could agree amongst them- 
selves as to the division of the certifi- 
cates of value received for their pro- 
ducts. It will be manifest that those 
factories which produce the best qual- 
ity of work, and the greatest quantity 



122 AN EQUITABLE EXCHANGE SYSTEM. 

of it, will have the most to divide. 
Thus, suppose the average production 
of one hundred men were equal to 
$200.00 a day. If the operatives of a 
certain factory, by adopting improved 
methods, and by exercising care and 
skill in the manufacture, should turn 
out goods to the value of $300.00 a 
day, each employee would receive his 
share of the increase, proportionate to 
his nominal wages ; whereas another 
factory, whose employees did not make 
use of improved methods, and were 
careless and lazy, would turn out a 
product inferior in quality ; conse- 
quently, while nominally receiving the 
same wages as in all other similar fac- 
tories, the value of their product being 
less, each operator would suffer a loss 
proportionate to his nominal wages. 



PLAN IN DETAIL. I23 

Thus every factory would be directly 
interested in seeing that every man did 
his duty. If a man were inclined to 
loaf or waste his time his fellow-work- 
ers would object, and he would find 
his nominal wages reduced. 

Would not such a system encourage 
the greatest production of wealth, pro- 
mote industry, and generally be an in- 
centive for every man to do his best ? 
It ought to be as easy for a man to 
sell goods as to buy them. Consider 
what an enormous waste of energy 
there is in our present method of sell- 
ing ; and the inequality resulting from 
the compulsory sale of goods below 
their value. 

The governmental warehouses will 
necessarily receive only those goods 
whose costs of production are ascer- 



124 AN EQUITABLE EXCHANGE SYSTEM. 

tainable, consequently those goods the 
value of which can only be determined 
by supply and demand, would be ex- 
cluded. The question as to whether 
the system should be applied to agri- 
cultural products has its difficulties, 
but I can see no reason why they 
should be excluded. Nature has so 
ordained that the products which are 
the most perishable are generally in 
the greatest demand. Dealers are not 
deterred from handling fruits because 
they are perishable ; the public pays for 
such losses through the enhanced price 
of the fruit. By far the greater quan- 
tity of such products are not only 
capable of being preserved, but the 
average cost of production can be 
ascertained. Corn, cotton, wheat, hay, 
etc., while both quality and quantity 



PLAN IN DETAIL. 125 

are largely influenced by climatic con- 
ditions, are yet generally profitable at 
certain prices. The certificates of 
value will be redeemed in any mer- 
chandise in the government warehouse, 
and when redeemed shall be cancelled. 

The next point is to fix the prices 
at which the governmental warehouses 
shall sell the products. This, it must 
be borne in mind, should be the actual 
cost, but as the cost inclu^des expenses 
of distribution, losses by fire, by depre- 
cation and other contingencies, a per- 
centage must be placed upon the goods 
to defray such expenses. 

The experience of the Rochdale co- 
operative stores shows how small the 
percentage of the cost of distribution 
may be under proper management, the 
parent store distributing, annually, over 



126 AN EQUITABLE EXCHANGE SYSTEM. 

$2,000,000, at an expense of less than 
one per cent, yet they have to work 
under the general disadvantage of the 
competitive system. 

Loss by fires would be very small, 
certainly much less than now, as every- 
body would be directly interested in 
preventing them, and those of incen- 
diary origin would be done away with, 
as there would be no motive. 

Losses by depreciation may occur 
in various ways, thus : Certain goods 
might get shop-worn ; others again 
might cease to be in demand, through 
the introduction of superior goods, or 
by producing goods which might be 
better adapted for the purpose origi- 
nally intended ; or from goods going 
out of style, or through breakage, or 
injury by moths, rust, and in various 



PLAN IN DETAIL. 127 

Other ways. Such losses are not a 
very important factor in computing 
costs, and may be mostly prevented 
by ordinary care. 

There would be no percentage 
added to cover interest charges, nor 
for rent, and but a very small per- 
centage would be necessary to cover 
repairs to property used by the State. 
If land were owned by the State, any- 
one could erect a house on any 
vacant lot and receive certificates of 
value on its completion. Certain re- 
strictions there should be as to the 
character of the buildings, — govern- 
ment inspection of the construction, 
sanitary regulations governing plumb- 
ing, etc., as public interests would 
dictate. Every owner of a house 
already erected could secure certifi- 



128 AN EQUITABLE EXCHANGE SYSTEM. 

cates of value for it, on passing title 
to the government authorities, at the 
appraised valuation. 

Leases of houses deposited with the 
authorities could be made on short 
time, the only charge being a sum 
necessary to keep the property in re- 
pair. Anyone desiring to purchase 
such properties would have priority 
over lessees. 

I think it may be claimed, conserva- 
tively, that the prices paid by the con- 
sumer, on an average, exceed the 
actual cost of production one hundred 
per cent. The manufacturer makes a 
profit varying from twenty-five to fifty 
per cent, gross ; the wholesaler, ten 
to fifty per cent, gross ; the retailer, 
twenty-five to fifty per cent, gross. 

Of course, in some lines, the figures 



PLAN IN DETAIL. I29 

are much less, but in many others the 
percentage of profit is much greater. 
These profits are necessarily large, 
owing to the cost of doing business 
under the profit system. The salaries 
of commercial travelers and their ex- 
penses, cost of rent, interest, adver- 
tising, etc., make it incumbent on the 
dealers to charge this apparently 
heavy percentage. Almost all such 
expenses would be abolished under 
this system, and the prices to the 
consumer would probably not be over 
half what they are now. Not only 
would there be this great gain to all 
consumers, but the support of the un- 
productive classes, which is now such 
a heavy burden on the workers, would 
be removed. Most of the occupations 
and professions which are usually 



130 AN EQUITABLE EXCHANGE SYSTEM. 

classed as unproductive are the out- 
growth of the profit system. Abolish 
the cause of legal difficulties, which 
originate in trade, and most of the 
lawyers would have to seek a more 
useful profession. Bankers, brokers, 
commercial agencies, collecting agen- 
cies, insurance companies and their 
army of clerks, would be unnecessary. 
What a gain this would be to the 
producing classes is evident. Every- 
one employed in such professions is 
a tax upon production, and the farm- 
ers and mechanics are supporting 
them. 

The merchant pays the legal fees, 
the salary of the commercial traveler 
and expenses, the expenses of the 
collecting agencies, and is the chief 
support of the bankers and clerks. 



PLAN IN DETAIL. I3I 

The consumer pays for all in the en- 
hanced price of the goods he pur- 
chases. 

Then consider the hundreds of 
thousands of the unemployed who 
could, under the system here advo- 
cated, always find employment. The 
genus tramp would be exterminated. 
Those who were able to work and 
would not could starve ; those who, 
from sickness or misfortune, were un- 
able to work, could be provided for 
by the public. 

I have been asked what would be- 
come of the widows and orphans de- 
prived of their ability to live upon in- 
terest? I answer, What does become 
of nine-tenths of them at the present 
time, without interest, and with oppor- 
tunities to make a living^ restricted 



132 AN EQUITABLE EXCHANGE SYSTEM. 

by the competitive system ? Are not 
the nine-tenths of more importance 
than the one-tenth? And can anyone 
fail to see that these widows and or- 
phans, who constitute the greater 
number of those deprived of their 
husbands and parents, would be in- 
finitely better off under a system 
where all could find employment, and 
where equal opportunities were guar- 
teed to all ? 

Under our present system such un- 
fortunates are compelled to work un- 
der very disadvantageous conditions, 
or are supported by relatives, and the 
ability of the relatives to afford such 
relief would not be lessened by hav- 
ing steady employment at full wages. 

All enterprises which are in their 
nature monopolistic ought to be 



PLAN IN DETAIL. 133 

owned and managed by the State, 
such as railroads, waterways, tele- 
phones, telegraphs, water supply, gas 
supply, etc. Public Interests would 
not be best promoted by permitting 
the streets of a city to be used by 
various telephone, telegraph or water 
companies, competition being Imprac- 
ticable. Government ownership Is the 
only alternative, unless v/e prefer ex- 
tortion. It Is a reflection on the in- 
telligence of the American people that 
they permit private corporations to 
control transportation. 

The evils of our political system, 
— corrupt elections, bribery of officials, 
and the scramble for office, — are the 
natural outgrowth of giving control of 
such sources of income to private 
corporations. These corporations are 



134 AN EQUITABLE EXCHANGE SYSTEM. 

conceived in corruption, nourished by- 
bribery, and their very existence now 
depends on controlHng- legislation by 
fair means or foul. 

A corrupt Council, for reasons agree- 
able to themselves, will give away or 
lease for an indefinite period valuable 
franchises, which they know will tend 
to become more valuable as popula- 
tion increases ; and yet the law says, 
that our servants having sold our 
birthright for a mess of pottage, we 
must abide by it. The law of con- 
tract is inviolable. Future genera- 
tions will refuse to recognize such 
titles, because corrupt officials cannot 
dispose of inalienable rights. 

An insurmountable objection to this 
exchange system in the eyes of some 
is the danger of bribery in connec- 



PLAN IN DETAIL. I35 

tion with the appraising of goods. 
Safeguards to prevent discrimination 
that suggest themselves would be to 
have prices fixed by a board, consist- 
ing of representatives from various 
factories, in connection with the gov- 
ernment experts. Evidence submitted 
as to the cost of production might be 
required from each factory. Prices 
having been once fixed they should 
be altered only through changes in 
cost of production. Thus, to encour- 
age invention, if it should be deemed 
necessary, patents could be granted 
the same as at present. When such 
patents became public property, and 
the use became general, a readjust- 
ment of price should take place ; but 
changes in the quantity of money or 
certificates of value could not affect 



136 AN EQUITABLE EXCHANGE SYSTEM. 

prices as they do under our present 
system. The money would always 
have a steady purchasing power, which 
Professor Andrews states is the ideal 
sort of money."^ 

Government employees should be 
paid no more than their services 
would command in other employ- 
ments. The reason of the scramble 
for government offices is due to the 
fact that the positions are steady and 
the pay much greater than men can 
make on an average in other employ- 
ments. Opportunities to make money 
corruptly are also the lure for some 
people. 

A certain class of men object to 
governmental control. There seems 



*"It is always either assumed or admitted that the ideal 
sort of money would be money with a unit having a 
steadfast general purchasmg power." — ("An Honest Dol- 
lar." — E. B. Andrews.) 



PLAN IN DETAIL. 1 37 

to be an idea that government is 
something separate and apart from 
the people, and antagonistic to that 
ideal state of individual freedom which 
they advocate. I can see no interfer- 
ence with absolute freedom, and the 
greatest possible liberty, in the plan 
I offer. To even mention government 
to some men is like holding up a red 
rag before an enraged bull. I believe 
in perfect freedom of action, so long 
as such freedom does not interfere 
with another's rights. I object to one 
man helping himself to another man's 
property. 

I believe that governnmetal owner- 
ship of land and natural monopolies 
is the only way to secure freedom. 
Men see the tyranny of government 
and the abuse of power that has 



138 AN EQUITABLE EXCHANGE SYSTEM. 

grown up under a false industrial sys- 
tem, and naturally go to the other 
extreme in opposition. 

Under the plan which I have at- 
tempted to make clear there will be 
no surrender of individual preference 
as to one's work, nor will any man be 
compelled to work if he does not 
want to ; but there should be general 
direction given to production by 
means of a statistical board, which 
anyone will admit is better than go- 
ing it blind, as we do now. 

Whether such an exchange system, 
which I have so crudely outlined, will 
be the system of the future, or 
whether it will develop along social- 
istic lines, remains to be seen. But 
one thing is clear. The present sys- 
tem, with the millions toiling for 



PLAN IN DETAIL. 1 39 

wages, and a privileged class con- 
trolling natural opportunities and com- 
pelling others to pay tribute, is 
doomed. 



140 STATISTICS. 

The United States Census Statistics, 1890. 



From Chas. B. Spahr's "The Present Distribution of Wealth 
in the United States." 



Distribution of 


wealth by families, five to a 


family. 


OWNING. 


NUMBER. 


AGGREGATE 
WEALTH. 


AVERAGE 
WEALTH . 


,50,000 and over 


125,000 


^33,000,000,000 


$264,000 


5,000 to 50,000 


1,375,000 


23,000,000,000 


16,000 


500 to 5,000 


5,500,000 


8,2C0,0O0,OOO 


1,500 


Under 500 


5,500,000 


800,000,000 
565,000,000,000 


150 




12,500,000 


55,200 



Seven-eighths of the families hold one-eighth of the nation's 
wealth. 

One per cent, of the families hold more than the remaining 
ninety-nine per cent. 

(This aggregate wealth is now, 1898, estimated to be %T2,- 
000,000,000,) 

Income from Labor and Capital Contrasted. 



FROM LABOR. 



FAMILIES HAVING 
INCOME OF 


NUMBER OF 
FAMILIES. 


AVERAGE 

INCOME FROM 

LABOK. 


TOTAL FROM 
LABOR. 


55,000 and over 


200,000 


53.500 


5700,000,000 


1,200 to 5,000 


1,300,000 


1,200 


1,560,000,000 


Under 1,200 


11,000,000 


380 


4,200,000,000 



12,500,000 



FROM CAPITAL. 

55,000 and over 52.410,000,000 

1,200 to 5,000 1,330,000,000 

Under 1,200 600,000,000 

Total Income from Capital and Labor .... 510,800,000,000 

One per cent, of the families receive from capital alone as 
much income as half receive from both capital and labor. 



statistics. 14] 

Debt of the United States, 1890. 



Estimated by George K. Holmes, Esq., the head of the 
Bureau of Mortgages. 



Funded Debts of Corporations : 

Railroads $4,631,473,184 

Street Railway Companies 151,872,289 

Telephone Companies 4.992.565 

Telegraph, Water, Gas, and all others 211,661,962 

Total ^5,000.000,000 

Real Estate Mortgages $6,000,000,000 

Crop Liens in the South 350,000,000 

Chattel Mortgages .... 300.000,000 

National Bank Loans . . 1,986,058,320 

Other Bank Loans 1,172,918,415 

Private Debts— Estimated 1,191,023,265 

United States Bonded Indebtedness 891,960,104 

State Bonded Indebtedness 228,997,389 

County 145,048,045 

Municipalities ... 724,463,060 

School Districts 36,701,948 

Grand Total ^18,027,170,546 



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